2013-03-12 14:28:21 - Recently published research from Business Monitor International, "Trinidad & Tobago Business Forecast Report Q2 2013", is now available at Fast Market Research

Core Views

Due to tepid global growth, our expectation of a modest recovery in the energy sector and a still-weak non-energy sector, we maintain our view that Trinidad & Tobago (T&T)'s economy will post an average expansion of 3.5% between 2013 and 2017. That said, this implies that the we expect the economic recovery to continue strengthening over the coming quarters following an average contraction of 1.6% between 2009 and 2011.

We expect T&T's fiscal accounts to post modest deficits over the medium term, following nearly a decade of fiscal surpluses, due a continued rise in recurrent expenditures, as well as modest declines in energy production.

That said, we expect that energy exports will continue to keep T&T's current account in surplus over

the coming years. However, declining production and little upside for natural gas prices on the spot market mean that we expect the current account surplus to remain off its highs over the coming years. As such, the diversification of T&T's economy, as well as its export markets will be essential to boosting the country's long-term growth trajectory.


Full Report Details at
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Major Forecast Changes:

We have revised down our 2012 real GDP growth estimate to 0.2%, as recent data showed that economic activity remained relatively weak in H212 on the back of a slow recovery in the energy sector and only modest growth in the consumer sector. That said, we continue to anticipate a modest acceleration in real GDP growth in 2013 to 2.5% as energy output begins to come back online, and the construction, industrial and consumer sectors improve as well.

Given that we believe the authorities will be keen to maintain a stable exchange rate as the economic recovery gains steam, we have adjusted our currency forecasts for 2013 to reflect a slightly stronger exchange rate. Indeed, we forecast the Trinidad & Tobago dollar to average TTD6.4000/US$ this year before ending the year at TTD6.4400/US$, implying modest depreciation from the year-todate average of TTD6.3800/US$.

Key Risks To Outlook:

Downside Risks: Should energy sector maintenance projects continue to drag down production over the coming months, we could see real GDP growth come in below our forecast of 2.5% for 2013. Such a scenario would pose downside risks to our forecast for interest rates to remain on hold at 2.75% through end-2013 as well.

Upside Risks: Should spending remain relatively restrained while energy sector revenues pick up over the coming quarters, we could see T&T's fiscal accounts remain in surplus in 2013. Nevertheless, we maintain our medium-term view that a secular decline in energy production, lower average oil prices, little significant upside for natural gas prices and rising current expenditures will pull the fiscal accounts into the red over the coming years.

Partial Table of Contents:

Executive Summary
Core Views
Major Forecast Changes:
Key Risks To Outlook:
Chapter 1: Political Outlook
SWOT Analysis
BMI Political Risk Ratings
Politics
Anti-Crime Initiatives To Have Limited Long-Term Impact
- We believe National Security Minister Jack Warner's plans to increase the military's role in domestic policing may help bring down crime in Trinidad & Tobago in the near term. However, with drug production on the South American continent unlikely to drop off substantially, security in nearby Venezuela likely to remain lax and limited domestic fiscal resources, we believe T&T will struggle to fight gang crime over the coming years .
TABLE: POLITICAL OVERVIEW
Chapter 2: Economic Outlook
SWOT Analysis
BMI Economic Risk Ratings
Economic Activity
Energy Sector Recovery To Boost Growth In 2013
- Despite downgrading our 2012 growth estimate to 0.2% due to continued poor data in recent months, we maintain our 2013 real GDP growth forecast of 2.5% for 2013. We believe the modest acceleration in economic activity this year will be driven by a return to growth for the energy sector, as well as a stronger expansion of the non-energy sector.
TABLE: ECONOMIC ACTIVITY
Monetary Policy
Rates Will Remain Low To Bolster Recovery
- Following a 25 basis points cut to the benchmark interest rate in September 2012, we expect the Central Bank of Trinidad & Tobago to hold the policy rate steady at 2.75% through end-2013. This comes on the back of our forecast that inflationary pressures will continue to decline this year, while real GDP growth remains relatively moderate at 2.5%.
TABLE: MONETARY POLICY
Fiscal Policy
Fiscal Deficits Ahead
- Falling revenues and rising expenditures suggest that after running fiscal surpluses for nine out of the previous 10 years, Trinidad & Tobago will post fiscal deficits in 2012 and 2013. Indeed, while in the face of far weaker energy sector revenues the government has begun to temper its previous expansionary fiscal policy, we do not believe this shift in policy will be swift enough to see the country avoid posting budgetary shortfalls in the coming quarters.
TABLE: FISCAL POLICY
Rising Energy Exports To Boost Current Account Surplus
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Full Table of Contents is available at:
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About Business Monitor International

Business Monitor International (BMI) offers a comprehensive range of products and services designed to help senior executives, analysts and researchers assess and better manage operating risks, and exploit business opportunities, across 175 markets. BMI offers three main areas of expertise: Country Risk BMI's country risk and macroeconomic forecast portfolio includes weekly financial market reports, monthly regional Monitors, and in-depth quarterly Business Forecast Reports. Industry Analysis BMI covers a total of 17 industry verticals through a portfolio of services, including in-depth quarterly Country Forecast Reports. View more research from Business Monitor International at www.fastmr.com/catalog/publishers.aspx?pubid=1010

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